Another "hawkish" vote from the Federal Reserve: It may only cut interest rates by another 25 basis points this year
Atlanta Fed President Bostic said he expects the Fed to only cut rates by 25 basis points this year, despite a median forecast of 50 basis points. He emphasized that forecasts will be adjusted based on new data on inflation and the labor market. Bostic expects the U.S. economy to slow down but remain strong, with a GDP growth rate of around 2% in 2025. He believes that the Fed's benchmark interest rate will eventually fall to 3% to 3.5% in the long term, but the specific timing is still uncertain
Atlanta Fed President and FOMC voting member Raphael Bostic updated his forecast for last month's Fed meeting on Tuesday, stating that he expects only one more rate cut this year, by 25 basis points.
"The median forecast is... another 50 basis points cut, but my forecast is for a 25 basis points cut," Bostic said at an event in Atlanta.
However, Bostic noted that his forecast is not set in stone, and he will make necessary adjustments based on new data on inflation and the job market. He said, "I remain open to my choices."
He expects the U.S. economy to slow down this year but remain strong, adding that the path to lower inflation may have some bumps. Bostic said he expects GDP growth in 2025 to be around 2% as households spend their savings. This year's growth is expected to reach about 2.6%.
The Atlanta Fed President also said he expects the Fed's benchmark interest rate to fall to around 3% to 3.5% in the long term, but the timing to reach this level is uncertain. The current benchmark rate is between 4.75% and 5%.
"Everyone asks us 'how fast' (the rate cut will be). I think it depends on the labor market and inflation," Bostic said in a dialogue in Atlanta on Tuesday. "In fact, I think we will see calm inflation, and I expect to see strong employment."
Last month, Fed officials lowered borrowing costs by 50 basis points, a move larger than usual to support economic strength. A strong jobs report and better-than-expected inflation data in September prompted several policymakers to suggest that future rate cuts by the Fed should be more gradual.
Bostic stated last week that if the data supports it, a pause in rate cuts should be considered in November, keeping an open mind about maintaining stable rates at one of the Fed's remaining two meetings this year. He reiterated on Tuesday that at last month's meeting, he expected a 25 basis points rate cut this year, but the final direction of rates will depend on the economy